Research Of Personal Income Tax Planning In A Company’s Compensation

Currently, the finance management in enterprises is getting more regularized. The accounting staffs in those enterprises also become better educated and experienced. As a result, enterprises are paying more and more attentions to tax planning. Meanwhile, along with the increased income and life standards of the general population, income tax becomes a relevant issue and an important concern for more and more people. However, many enterprises and individuals are lack of the necessary knowledge in dealing with personal income taxes, not to mention the personal income tax planning. From the government’s point of view of the government, the enterprises’ legal tax planning activities enable the government to empower the regulatory function of tax laws, and lead the enterprises to develop to the direction the governments wishes. From the enterprises’ aspect, a deep understanding of the relevant provisions of the tax law will allow them to formulate the optimal business activities and management solution, in order to achieve the tax saving purpose. At the same time, personal income tax planning, if optimized together with the enterprise’s compensation structure, can benefit both the enterprise and its employees.This paper aims to provide the qualitative and quantitative analyses of the tax planning strategies of a typical company, for its employees at different income and education levels. The analyses cover the aspect of saving tax expense for both the enterprise and the employees, as well as the aspect of optimizing the compensation structure in order to motivate the employees. By studying the relevant theories for personal income tax planning and compensation managements, the paper analyzes the company’s existing compensation structure and personal income tax situations, and identifies the problem in the existing system. Then suggestions on improvement of the current system are proposed. Based on the above analyses, important observations about the application of personal tax planning in compensation management were made.